Woolworths' David Jones takeover turns Myer from hunter to hunted

David Jones has received a $4 a share offer from South Africa's Woolworths.

David Gray: Reuters

Gordon Cairns will join an exclusive club once the takeover of high street retailer David Jones is complete.

After joining the DJs board as chairman a little over a month ago, Mr Cairns will be vying for the record of shortest ever reign at the top of a major listed company.

This morning's $2.15 billion takeover bid from the South African-based Woolworths came like a bolt from the blue.

However, it has clearly been driven by the new chairman following months of scandal that has plagued the company, decimated its board and left it vulnerable to attack.

The $4 a share cash offer – which the David Jones board is recommending to shareholders – is pitched at almost a 25 per cent premium to the retailer's recent share price, which effectively blows rival Myer out of the water and now leaves it exposed and vulnerable.

Major shareholder Simon Marais, of Allan Gray Australia, says the offer came as a surprise, albeit a pleasant one.

"It was news to us, we had no inkling," he said.

"I think they (Woolworths) are paying a very good price, but don't tell them that."

Woolworths has experience in Australian retailing, after snapping up control of Country Road years ago, a deal that was less than successful after retail magnate Solly Lew refused to sell his stake, forcing the pair into an uncomfortable alliance.

It is clear the South Africans have learnt from those mistakes, with a fully-priced bid that has elicited a unanimous board recommendation.

David Jones had been working on a variety of options in an effort to fend off Myer's unsolicited nil-premium share swap merger, until Woolworths came knocking.

The Myer offer, rejected out of hand late last October, was revived in February with a sweetener that would have delivered the real estate assets back to David Jones shareholders - but that proposal too received a lukewarm response.

David Jones, meanwhile, appointed a series of high-profile advisers that most analysts believed were working on improved terms for a merger with Myer, but now appear to have been negotiating the rival offer from Woolworths.

Myer's recent results, in both sales and earnings, have been less than spectacular, and it was clear the original bid was pitched to shore up its future.

Its share price has been on the slide for most of this year and, in the view of the market, it now has shifted from hunter to prey.